- HEADLINES: Chicago corn charges higher and tests 50/ 100 day moving average; Wind damage to crops important in NE IA; US ethanol production slows.
- It has been a mixed Chicago trade with corn the upside leader while wheat holds chart support on improving world tenders/demand. Soy has traded either side of unchanged with traders agreeing that the overnight/morning rains helped the crop. The rain comes too late to produce much benefit to corn.
- We look for a mixed close with fund managers closely watching to see if December corn can climb back above its 50/100 day moving averages at $5.52 and $5.53, respectively. Corn futures broke key support last week and the market is now coming back to test the breakdown. A close above $5.54 December will force out some of the faster moving managers that went short on the break late last week. In November soybeans, the 50-day moving average crosses at $13.4075, another key area to monitor. Wheat is well above all support levels with an uptrend in place after a $1.00/bu rally.
- Producers report that there has been significant straight line wind damage to crops in Fayette/Black Hawk counties in Iowa. Wind damaged crops are reported from west of Waterloo northeast into Decorah. Damage assessments are ongoing but downed corn appears to the biggest yield concern with stalks broken off or toppled over.
- It does not take much of a break to return world wheat demand. Iran is bidding for Russian/E European wheat with mentioned tonnages said to be upwards of 1.0 million mt. World wheat traders are raising their estimates of Iran wheat imports to 3.5-4.5 million mt amid the constant buying. The big question for Iran is payment and financing. FAS/USDA has Iran taking 2.1 million mt of world wheat in 2021/22 or 100,000 mt less than last year. The trade sees this estimate as low with drought producing an acute shortage of Iran flour/bread within the country. We estimate Iran taking at least 4.0 million mt of world wheat, double the USDA estimate.
- Turkey returned with a wheat tender for 300,000 mt which will likely be sourced from Russia. And Tunisia/Jordan are tendering for 100,000 mt of wheat. World wheat demand stays strong with importers uncovered on future demand beyond October.
- Russia’s Ag Ministry reported that 63.2 million mt of wheat has been harvested vs 68.4 million in the same week last year. Russia has cut wheat on 20.5 million ha of land, up 1.3 million ha from last year. The average yield is 3.09 mt/ha down nearly 14% from last year. The yield data argues for a final 2021 Russian wheat crop of 71.5-72.5 million mt.
- US ethanol production continues to slide on the high cost of feedstock, corn. Although plant margins are highly profitable, US ethanol producers are awaiting the new crop with heady premiums being paid for old crop corn. We see the slowing US August ethanol corn grind causing USDA to drop its 2020/21 US corn ethanol corn grind estimate by 25-35 million bu in September.
- The midday GFS weather forecast is wetter across Louisiana/Mississippi with a hurricane mid next week. The hurricane is forecast to make landfall around NOLA and slowly push north producing copious amounts of rain with totals exceeding 8-12.00″. The flooding rain and strong wind are a risk to unharvested crops in LA/MS. The storm slowly shifts NE into the SE US. The storm is not expected to replenish soil moisture in the Eastern Midwest, but some rains are forecast for early next week. Temperatures are warm to hot through the weekend and then cool late next week.
- It feels like new hedge fund money is coming into the grain space based on a developing bearish view of the US$ and a waning of the summer weather market. We see US corn/soy yields sliding on the less than favourable August weather. A US corn yield of 172-174 bushels/acre corn and 49-50 bushels/acre soybean is realistic in our opinion. Seasonal lows are forming, again our opinion.